Imagine this: For years, Scott had been saving up to buy an apartment. He was getting closer to his goal — he recently started looking at real estate listings and decided to pull up his credit report to see what interest rate he might qualify for on a mortgage.
Scott thought he’d have a high credit score based on his income and track record of paying bills on time. But when he read through his credit report, he noticed an unfamiliar credit card account. When he investigated further, he found it belonged to someone else with a similar name — let’s call him “Scott D.” — who had a history of late payments. Credit report errors like this affect 1 in 5 consumers, which means Scott is hardly alone.
Since credit scores can influence the interest rates made available to Scott on mortgages and other types of loans, Scott knew he had to take steps to correct this mistake, even if it put his plans on hold for a few months.
Here are 4 steps you can take if you have credit report errors like Scott.
A free credit report from each of the three main credit reporting agencies (Equifax, Experian and TransUnion) is available to every consumer once every 12 months. Request yours to make sure you know your credit report is accurate, because what’s on your credit report could affect the interest rates available to you.
Set aside time to review every single page of your credit report. As you comb through, look for mistakes, large or small. This might mean the inclusion of an address that isn’t yours, or it could be a fraudulent account. If the report says you made some payments late, but you didn’t, circle that: it could be a mistake.
To fix credit report errors, you’ll have to contact the credit reporting agency that provided the report or the company that provided the information to the credit reporting agency. You can generally find the correct contact information on the credit reporting agency or company website. The major credit reporting agencies even have accessible online tools for managing disputes. When you contact the credit reporting agency or the company, provide all relevant details to prove that the credit report entry is indeed a mistake.
It’s important to contact credit reporting agencies in writing, rather than by telephone, so you have a record of your communication. The U.S. Federal Trade Commission provides sample dispute letters you can download on its website. Tell the credit reporting agency what information in your credit report is inaccurate and ask that the incorrect information or mistake be removed or corrected. You can include copies of any documents (such as statements or payment receipts) that support your position. You may also wish to include a copy of your credit report with the mistake or incorrect information clearly marked or highlighted. You should send your letter via certified mail with “return receipt requested” so you have proof that the credit reporting agency received your letter.
In addition to contacting the credit reporting agency to correct a credit report error, don’t overlook the company or person who may have reported the incorrect information in the first place. Once again, send a letter listing the mistake and provide proof of the error (receipts or statements, for example). Ask the company to send correct information about you to the credit reporting agency.
After you’ve sent your letters, don’t forget to follow up with the credit reporting agency to be sure the correction has been made. If you’ve found a mistake and the dispute resulted in a change, you’re entitled to another free report. You can also request that the bureau send out corrected information to anyone who’s pulled your credit report in the last six months.
Finally, if the company that reported the error corrects the false information after the dispute, it is required to send out a notification all credit agencies, too. Be sure to follow up with the company to find out if this has happened.
Once your credit report is accurate and any mistakes have been corrected, you can work on raising your score. You’ll want to continue making good decisions to build credit so that in time, you may be eligible to receive lower interest rates. Doing things such as paying your bills on time so they don’t go to collections, keeping balances low on credit cards and other types of revolving credit will also help improve your credit score. You can also request new credit reports once 12 months have passed to ensure there aren’t any new inaccuracies.
According to the Fair Credit Reporting Act, incorrect, inaccurate or unverifiable information in your credit report must be corrected or removed, usually within 30 days. It could take a few months before the correction affects your credit score.
There are services that offer to contact credit reporting agencies on your behalf to correct errors or inaccurate information in your personal credit report, many of which can be found online, but contacting credit reporting agencies yourself isn’t difficult and can save you money.
A number of services will monitor your personal credit report and alert you of any changes. In addition to potentially alerting you to errors or mistakes in your credit report so that you can fix the mistakes more quickly, credit monitoring companies can also help you avoid potential identity theft by letting you know when new credit accounts are opened in your name. Some credit monitoring companies even monitor your social security number across thousands of databases worldwide.
Married couples don’t have a joint credit report or joint credit score – instead, each spouse has his or her own credit score. However, when married couples have joint accounts – for example a joint mortgage or credit card in both names -- any errors or bad credit on the joint account will affect both spouses’ credit scores. It’s important for both spouses to check their personal credit reports regularly and correct any mistakes as quickly as possible, especially on joint accounts.
A credit score can feel like an arbitrary grade, but for lenders, the score predicts the likelihood that you’ll pay back a loan. A high score means you’re a lower risk to the lender, which translates into a lower interest rate for you. A low score communicates that you’re a higher-risk borrower, and you’ll have to pay more for the opportunity to borrow money. If you deserve a high score but an error on your report misrepresents you as a riskier prospect, you’ll be paying more for no reason.
In Scott’s case, he set aside time to contact the reporting agencies and correct his credit report. Fixing the error eventually improved his credit score, allowing him to qualify for a better rate on his mortgage.